Rachel Reeves opted for the do-nothing approach, and given the impact on UK business of her previous two Budgets, this feels like a win for those of us who want to see growth.
January tax receipts were considerably higher than forecast, likely due to increased business sales and shareholder remuneration, with business owners trying to beat the upcoming rises to income tax on dividends and Capital Gains Tax under the Business Asset Disposal Relief provisions.
This gives the Chancellor greater headroom, which hopefully can avoid her having to return for more tax rises in the Autumn Budget, even if she feels the need to indulge any further government spending plans.
Or, she may need that buffer to counter the unknown headwinds resulting from conflict in the Middle East, which has already seen an impact on stock markets, energy prices and the cost of government borrowing. Mrs Reeves talked in the Statement about ‘charting a course through uncertainty’, and that is undoubtedly truer now than when she drafted her speech.
The growth forecast for 2026 was downgraded from 1.4% to 1.1%, which was not unexpected. We are still seeing the impact on recruitment and business profitability of the Employer National Insurance increases and minimum wage rate rises announced in spring 2025; unemployment is forecast to increase further this year. The silver lining is that the NI rise was a one-off and business have more certainty now, so can plan ahead to absorb these costs across another trading year.
Higher growth forecasts for 2027 onwards are welcome, but as with all longer-term predictions, what actually happens depends on many unknown factors, not least any new tax measures the Chancellor may be considering for her annual Budget in the Autumn, as well, of course, as geo-political events outside the UK’s control.
Predicted increases in GDP per person are good news; it would make even more of a difference to working people if we could see some relaxation of the personal allowance and higher rate income tax threshold in the autumn. Fiscal drag is now impacting so many people that even those on the basic state pension could be pulled into tax for the first time before long.
Local businesses are resilient and growth will come with certainty and consistency from government. However, much capital is being held back in case of more surprise policies. The constant speculation before last year’s Budget led to businesses suppressing investment decisions; unlocking this spending requires confidence that businesses can plan ahead positively.
Mrs Reeves boasted about measures which matter to working people such as rail fares, energy bills and fuel duty, but for us all to feel richer we need private business to grow and the tax burden to reduce.
For now at least, the do-nothing approach adopted this time around is a blessing. When it comes to the Autumn Budget, I hope lessons have been learned and we see less meddling, less leaking – and more support for local and UK businesses.